Massachusetts is a recourse state. If the home is in a recourse state, the lender has rights to pursue you for the remainder of the balance and also the penalties, fees, interest, etc.
If the lender forgives the debt, and it is not your primary residence, i.e., second home or vacation home, unless you are INSOLVENT you WILL be responsible for taxes should the lender forgive the debt. Forgiveness of debt or cancelation of debt income CODI can only occur if the lender waives their right to pursue you for the balance. The taxes on the forgiven portion will not have to be paid UNLESS the foreclosure happens after 2012 as the Mortgage Debt Forgiveness Act was for sales of residences from 2007 through 2012, thanks to President Bush.
It's likely safer to try for a short sale, but seek an attorney's advice.